Filling in the GAP
August 17, 2015 | White Rose Credit Union | Financial Wellness
Why do we buy insurance? We make this “just in case” investment, to assure us that if something unexpected were to happen, we would be covered. This mentality applies regardless of the kind of insurance you are purchasing. Whether its home owners insurance in case of a break in, health insurance to protect against the financial strain of an unforeseen emergency visit, insurance helps cover us “just in case.”
Auto insurance is no different, but what about the gaps in auto insurance plans? Most people have either comprehensive and collision insurance or liability auto insurance. These are the two most common types of auto insurance.
Car GAP insurance is designed to cover the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.). GAP coverage is mainly used on new and used small vehicles (cars and trucks) and heavy trucks.
Here is an example of the importance of car GAP insurance from a member of our team:
“When I purchased my car three years ago, I was upside down in value because of the vehicle I was driving at the time and was trading in. I owed more than the car is worth. So what happens if you have a car accident and your insurance totals your car and sends you a check for fair market value BUT you owe more than that? You are stuck with a car loan and no car. GAP insurance covers that “gap” of what is owed and what fair market value is.
I was in a car accident a few weeks ago, my car was totaled. My insurance sent me a check for $6,000 which was fair market value but I owed almost $8,000 on the loan. Thank goodness I had purchased the GAP insurance or I would have had to satisfy that debt (a difference of almost $2,000), with no car to show for the money. At the end of the day, I paid about $3 per month for this protection that has now save me $2,000.
It is very typical these days for consumer’s to be “upside down” in a car loan. Especially consumers that either trade in a car they still owe money on and/or finance the tags, tax and title (no down payment scenarios).
The insurance protection we offer is truly to protect our members. We do not leave room for profit on this feature because it is so important for our members to have this type of auto coverage.”
If you finance or lease your vehicle, it is imperative that you inquire about GAP insurance. This investment is typically 5%-6% of the premium for collisions and comprehensive insurance, which equally roughly $800.
However, as a benefit to our members WRCU is offering car GAP insurance for only $170. Stop by one of our convenient locations or contact a member representative for more information and how you can protect yourself against financial loss.